Summary:Southern Oregon University (SOU) requests Board
authorization to sell the unimproved 40.48 acre Perozzi surplus property to Ms. Barbara Coffman of Ashland, Oregon,
for the appraised value of $890,000. If approved, the proceeds from the sale would be retained by SOU and used
for educational programs, as stipulated by a restrictive covenant. The tentative plans include, among other potential
projects, the development of an outdoor native plant laboratory on campus property near the Science Building.

Staff Report to the Board:

BackgroundThe unimproved Perozzi property (40.48 acres), which
lies in Jackson County, south of the Ashland City limits as outlined in Exhibit A, was bequeathed to SOU in 1939.
The property is approximately ¼ mile south of the SOU campus and is surrounded by residential development
on very steep terrain. SOU declared the property surplus to its needs and gained approval from the State Board
of Higher Education in June 1994 to offer the property for sale. The City of Ashland was the only entity to express
interest in the property at that time. However, after three years of unsuccessful negotiations, the City formally
withdrew from the sale due to an impasse over the sales price.

The pace of the current effort to sell the property escalated
when SOU was notified by Jackson County that the current RR 5 zoning for the property would change to RR 10, which
would significantly decrease the value of the property by changing the minimum subdivisions from 5 to 10 acres.
SOU officials submitted a subdivision application to Jackson County to hold the zoning at RR 5. The application
was deemed complete by Jackson County on March 30, 2001, but approval by the Jackson County Planning Commission
will be required as a condition of the sale.

Property InformationThroughout the offer and sale process, SOU acted to
ensure that the State's requirements were met and that areas of concern to the City were addressed. The buyer responded
to several concerns regarding watershed preservation and open space in her proposal to develop the property into
a subdivision consisting of seven lots, each of which would contain a single-family dwelling.

Staff Recommendation to the Board:Staff recommends that the Board approve the
sale of the Perozzi property (approximately 40.48 acres) to Ms. Barbara Coffman, of Ashland, Oregon, for the sum
of $890,000, with the proceeds used only for educational programs at SOU, in compliance with the donor's restrictive
covenant.

(Note: A hard copy of Exhibit A: a map of the Perozzi Property
and the SOU Campus Boundary, is on file in the Board's office.)

Purpose:The University of Oregon requests an exception
to OAR 580-50-0025 regarding the naming of buildings after a living person. If granted, this exception would permit
the University to rename the University Inn, a 450-room dormitory for returning and freshmen students, in honor
of H. Philip Barnhart, Director of University Housing, from 1949 to his retirement in 1979. The OAR provides that
an exception may be made if there are "unusually meritorious reasons."

Staff Report to the Committee:Officials at the University of Oregon (UO)
request approval to name the University Inn, one of the UO's largest undergraduate dormitories, as "H. P.
Barnhart Hall." Built in 1966, the building to be renamed is a large, imposing edifice and a strong example
of mid-century architecture. Some seven-stories high, housing 450 students, it is fortunately sited above the scenic
Millrace.

The achievements for which Mr. Barnhart would be honored stem
from his 30-year service as Director of University Housing, from 1949 to 1979. During these years Mr. Barnhart
oversaw the most dramatic growth of student housing in the history of UO, coinciding with the baby boom effect
that so strongly changed the nation's demographic character. During his tenure as director, Bean Complex, Earl
Hall, Walton Complex, and Hamilton Complex were built and the purchase of the University Inn was negotiated. Most
of the residential housing now in service to students, including the Westmoreland housing development for married
students and dozens of single family rental properties, were purchased or constructed under his direction.

Mr. Barnhart's administrative philosophy was one of fostering
high service to student residents; he thus brought together all service units of student housing, from dining to
the residential life program, and ushered in a more modern management style. During his tenure, he brought a high
quality of enlightened leadership to the position. Remembered by employees as a no-nonsense manager with a generous
spirit, he handled matters with fairness and was always keen to recognize the achievement of individual staff members.
Students also remember him as someone who expressed genuine concern for their well-being and success in their studies.

H. Philip Barnhart received a Bachelor of Science degree from
Pennsylvania State University in 1947 and joined the UO as Director of Dormitories in 1949, having served in the
U.S. Army infantry from 1941 to 1945. He landed at Omaha Beach during the final drive to end World War II. His
support for UO has continued since his retirement, with service on many committees and community organizations.
His son is Representative Philip Barnhart, who currently sits in the Oregon House of Representatives from the South
Eugene voting district.

In recognition of H. P. Barnhart's unusually meritorious contributions,
this honor is requested by UO.

Staff Recommendation to the Committee:Staff recommends that the University Inn be
renamed H. P. Barnhart Hall, in honor of H. Philip Barnhart, long-time Director of University Housing at UO.

Consent for
Sale of Perozzi Property (SOU)

Further Detail

Summary:Southern Oregon University (SOU) requests Board
authorization to sell the unimproved 40.48 acre Perozzi surplus property to Ms. Barbara Coffman of Ashland, Oregon,
(Buyer) for the appraised value of $890,000. If approved, the proceeds from the sale would be retained by SOU and
used for educational programs, as stipulated by a restrictive covenant. The tentative plans include, among other
potential projects, the development of an outdoor native plant laboratory on campus property near the Science Building.

Staff Report to the Board:

BackgroundThe unimproved Perozzi property (40.48 acres), which
lies in Jackson County, south of the Ashland City limits as outlined in Exhibit A, was bequeathed to SOU in 1939.
The property is located approximately ¼ mile south of the campus boundary and is surrounded by residential
development on very steep terrain. SOU declared the property surplus to its needs and gained approval from the
State Board of Higher Education in June 1994 to offer the property for sale. The City of Ashland was the only entity
to express interest in the property at that time. However, after three years of unsuccessful negotiations, the
City formally withdrew from the sale due to an impasse over the sales price.

The pace of the current effort to sell the property escalated
when SOU was notified by Jackson County that the current RR 5 zoning for the property would change to RR 10, which
would significantly decrease the value of the property by changing the minimum subdivisions from five to 10 acres.
SOU officials submitted a subdivision application to Jackson County to hold the zoning at RR 5. The application
was deemed complete by Jackson County planning officials on March 30, 2001, but approval by the Jackson County
Planning Commission will be required as a condition of the sale.

Legislative ConsiderationsThe sale of this property falls under several state
statutes, which are outlined below:

Appraisal: (ORS 270.100(1)(c)) At least one appraisal must be performed, which was obtained in November
2000 from Southern Oregon Appraisal Services. The $890,000 appraisal was based on the RR5 zoning.

Agency Notification: (ORS 270.100) The Department of Administrative Services (DAS) was notified that the
property was deemed surplus. DAS sent announcements to other state agencies and public entities, which were offered
the first opportunity to obtain the property. However, no responses of interest in the property were forthcoming.

Public Comment: (ORS 270.105(2)) SOU was required to invite public comment to consider all of the values
of the property to the people of this state. Thirty-eight comments were received with the most notable concern
being the potential loss of open space and wildlife habitat. SOU officials and the Department of Justice agree
that the Coffman proposal sufficiently addresses the concerns expressed by the public, thereby complying with the
above referenced statute. Specifically, the Coffman proposal responded to the public concerns as follows:

Less than 20% of the land would be impacted by the development
of the lots.

Ten acres were made available to the City of Ashland for trail
access to the City owned Siskiyou Mountain Park. Five acres to be donated and five acres available for purchase.
However, The City of Ashland was unresponsive to the offer.

Public Notification: (ORS 270.130) SOU officials announced the property for sale in the local print media
for three successive weeks. The notice generally described the property and the legal subdivision. The notice also
reserved the right to accept or reject any proposal. Two potential buyers submitted offers: The City of Ashland
offered $300,000 and Barbara Coffman, an Ashland resident who lives adjacent to the property, offered the assessed
value of $890,000.

Property InformationThroughout the offer and sale process, SOU acted to
ensure that the State's requirements were met and that areas of concern to the City were addressed. The buyer responded
to several concerns regarding open space and watershed preservation in her proposal to develop the property into
a subdivision consisting of seven lots, each of which would contain a single-family dwelling:

The City requested permission to have a trail easement on the
property. Ms. Coffman offered to donate one lot on the west side of the parcel wherein the trail easement would
be located and offered to sell another lot on the west side to the City as additional open space.

The City was concerned, due to the hilly terrain of the property,
about damage to the Roca Canyon watershed. University property could also be affected by damage to the watershed.
Ms. Coffman responded to the concern and has committed to develop the subdivision, where feasible, using the building
guidelines of the City of Ashland which are, in some cases, more restrictive than that of Jackson County. Concerns
about damage to Roca Canyon are being addressed by the positioning the houses to drain away from the Canyon and
by following very conservative clearing practices.

ScheduleClosing to occur on or before September 20, 2001.

Financial ConsiderationsA cash offer was made by Ms. Coffman, with 10% earnest
money received with the proposal.

Legal ConsiderationsThe following conditions remain open and must be satisfactory
resolved prior to settlement:

Seller

Acquire approval of State Board of Higher Education.

Buyer

Approval of pending subdivision application before the Jackson
County Planning Commission on or before September 20, 2001.

Confirmation that wells dug on the property produce no less
than 10 gallons per minute.

Staff Recommendation to the Board:Staff recommends that the Board approve the
sale of the Perozzi property (approximately 40.48 acres) to Ms. Barbara Coffman, of Ashland, Oregon, for the sum
of $890,000, with the proceeds used only for educational programs at SOU, in compliance with the donor's restrictive
covenant.

(Note: A hard copy of Exhibit A: a map of the Perozzi Property
and the SOU Campus Boundary, is on file in the Board's office.)

Oregon State Board
of Higher Education
Board Committee on Budget and Finance
April 20, 2001

Meeting attendees also included other institutional representatives,
other members of the Chancellor's Office staff, and interested observers.

The meeting was called to order at 8:10 a.m.

MINUTES FROM MARCH 20, 2001A motion was made by Director Geri Richmond to accept
the minutes from the March 20, 2001, meeting, Director Tim Young seconded the motion; the motion was approved.

REPORT ITEM

ACCOUNTABILITY FRAMEWORKAnderes introduced the topic by stating Arthur Andersen
Consulting was contracted to review and assess the needs of a fiscal accountability framework for the System. Jim
Roth, partner, and Jennifer Hubert, manager, Arthur Andersen Consulting, provided their report on this assessment.
Mr. Roth advised that over 30 campus and System staff were interviewed to provide background and assessment of
the fiscal accountability framework.

Roth introduced the topic by noting that there are two very strongly
competing ideas pertaining to the fiscal accountability framework: 1) a strong desire for universities to be autonomous
and unburdened by complicated financial reporting structures and 2) a strong need for financial reporting structures
that provide information to all levels. Recent implementation of new administrative systems and a new budget model
have permitted a change in operating procedures to take place. While presently a crisis is not looming in Oregon
that prompts an immediate restructuring of the fiscal accountability framework, keeping the framework current is
a fundamental requirement for any organization. The external auditors (Deloitte and Touche) have underlined this
need by issuing a management letter calling for change in the fiscal accountability framework.

Background:Roth provided background describing changes that have
taken place within the System over the past ten years (e.g., the higher education efficiency act [SB 271], new
system implementations [FIS, SIS, HRIS], a new resource allocation model, and a rapidly changing competitive environment
requiring faster response from universities). These changes have led to increased autonomy for the campuses and
give rise to the question: "How do we manage this decentralization of authority?"

The project objective was to recommend ways to improve the framework
consistent with fulfilling the fiduciary responsibility of the Board and Chancellor's office, while recognizing
the increased responsibilities of the individual institutions. The framework is a management structure that provides
controls and guidance designed allow the OUS Board to set fiscal-related goals and monitor performance in terms
of those goals. This requires a definition of roles and responsibilities; delegation of responsibility and authority
for functions and processes, as appropriate; deployment of adequate staff and other resources; clear and effective
policies and procedures; internal controls; reporting; internal performance measures, including trend analysis,
actual expenditures-to-budget, and benchmarks; and monitoring and accountability for results. As there are many
options in the transition from centralization to decentralization, the best fit must be found for the System.

Current Accountability Framework:Since the implementation of SB 271, many fiscal processes
were transitioned from a centralized location at the Chancellor's Office to a more distributed environment at the
institutions with limited strategic analysis and without a corresponding realignment of fiscal controls within
this new fiscal environment. Roles and responsibilities of the Board and the Chancellor's Office were not clearly
defined and there was no clear delineation of responsibility between Chancellor's Office staff and the institutions,
resulting in minimal communication of expectations and gaps in the current alignment of fiscal processes. Institutions
do not have clear policy guidance and information to perform processes effectively, which leads to limited System
or institutional financial management reports evaluating fiscal effectiveness or economic efficiency.

Recommendations:The fiscal accountability framework must be revised
to 1) be consistent with the move toward a more decentralized operating model; 2) reaffirm the fiduciary responsibility
and the roles of the Board and Chancellor's Office in providing policy guidance and monitoring; and 3) establish
authority and assign responsibility to institutions to carry out operations within defined parameters. These actions
should incorporate a clear delegation of authority to those held accountable for results with well-defined goals
and expectations, and the use of appropriate internal performance measures.

An overview to be taken of steps to improve the fiscal accountability
framework include the following:

The Board provides a basic guiding framework to clarify the
goals of OUS and clarify, confirm, or modify roles in terms of fiscal operations, including the following:

The Chancellor's Office offers additional structure supporting
the framework to provide policy guidance and to identify information and resource needs for the Board and Chancellor's
Office in fulfilling its roles.

establishing high-level guidelines and internal performance
measures for processes; and

focusing on individual fiscal activities to define and perform
processes within the framework. This could entail modifying current processes, as necessary; identifying resource
requirements (e.g., staffing, training, system enhancements, and shared service centers); identifying detailed
internal performance measures; revising policy documentation; communicating expectations and resources to those
involved in the process; and monitoring and revising the process, as necessary.

Implementation:The implementation process will require resource commitments
of time and staff. Mr. Roth advised that steps to implementation involve the following:

Identifying team members for the various committees (e.g., core
workgroup, process workgroups, subject matter experts, and project advisors).

Assigning tasks.

Monitoring the progress.

Discussion:Director Richmond asked Mr. Roth to give a grade to
the current system. Mr Roth advised that there are problems with the current system and, although it will not fail
in the near future, a restructuring needs to be accomplished soon (giving the current framework a "C").
The increased responsibilities given to campuses create difficulties with the current framework. Director Richmond
asked for examples of problems that could occur. Mr. Roth advised that the current financial reporting capabilities
cannot provide effective, accurate, or in-depth information that gives a clear picture of the System's financial
condition to the Board. The framework must be able to support the need for providing fiscal performance information
to the Board. Director Young asked what the greatest challenge would be to accomplishing this restructuring. Mr.
Roth advised that getting a consensus on what needs to be accomplished will be the most difficult step. The fiscal
accountability framework is an easy issue to postpone, and gathering the appropriate staff to tackle the process
may be difficult due to the low priorities set by the institutions and the Chancellor's Office on the project.

Vice Chancellor Anderes agreed with Mr. Roth's comment, noting
that from an organizational standpoint, a reasonable schedule must be set, with issues identified and then reported
to the Board. However, needs of the Board must be identified before proceeding with the project (for example, annual
revenue and expenditure analysis, exception reports, etc.). On a monitoring level, the Chancellor's Office requires
another level of information and relationship/organizational review with the universities than presently exists.

The next step will be to create workgroups, look at where we
are, and identify what "best practice" approaches are necessary. Director VanLuvanee stated that, in
his opinion, the first focus should be on the universities; if the Board receives what it wants but the presidents
don't have the information they need, the information is not adequate for the System. He also asked if private
universities will be approached for assistance. Anderes advised that in the course of this project, workgroups
will be looking at private, public, and System models, and national (GASB) reporting requirements, with a focus
on providing more and better information to the Board. Mr. Roth advised that the University of Florida System is
decentralizing and their universities are grappling with what information is needed by the new Board structure.

Anderes advised that this fiscal accountability framework project
began over two years ago. The restructuring must look at more than just the changes in fiscal practices that are
a result of SB 271. It must also look at purchasing and budgeting methodologies. Director Richmond stated that
it is important to look at the defining issues and goals set by the Board and universities and to ensure that these
goals are being met through the fiscal accountability framework--if not, the Board is "just bookkeeping."

ENGINEERING / COMPUTER SCIENCE ENHANCEMENTSVice Chancellor Anderes advised that the Board originally
requested $40.6 million in state General Fund support ($30 million to support the Engineering Technology Industry
Council (ETIC) initiative (2x) and $10.6 million to support the top tier initiative). The Governor has recommended
a $20 million enhancement be allocated. As presented in March, the Committee is asked to approve the allocation
be distributed as follows: $15 million to ETIC and $5 million to top tier proposals. This distribution is in recognition
of the value and priority of both initiatives, and of continuing support for ETIC programs into the third biennium
with each initiative enhanced by the other (i.e., additional faculty, research, and students through the universities'
programs).

The implications of this allocation is that it extends the time
line for completion of set goals. In other words, an estimated four biennia will be needed to reach the level targeted
in the original proposal. With decreased state funding, there is increased pressure to raise private funds. And
with the ETIC goal of doubling graduates and improving performance, it will be essential to assign performance
measures to monitor progress.

The recommended allocation appears in the following table:

Proration of Combined ETIC/Top Tier Proposals
($15+$5 million)

ETIC

Top Tier

Total

State

Other

State

Other

State

Other

OCECS

$ 0.89

$0.85

-

-

$ 0.89

$ 0.85

OGI

1.87

0.43

-

-

1.87

0.45

OIT

1.23

0.30

$0.65

$0.65

1.87

0.95

OSU

5.50

1.60

2.93

2.93

8.43

4.53

PSU

3.15

3.15

0.98

0.98

4.13

4.13

UO

1.88

1.60

0.45

0.45

2.32

2.05

Research

0.50

0.50

-

-

0.50

0.50

TOTAL

$15.00

$8.43

$5.00

$5.00

$20.00

$13.43

Discussion:Director Richmond commended Vice Chancellor Anderes
for his understanding of the need for hiring good faculty and establishing accountability; but was disturbed in
the February meeting when it was announced that adjunct faculty would be hired through the ETIC initiative. In
Director Richmond's opinion, long-term commitment or quality is not received when hiring adjunct faculty. Arguably
there will be an increased level of need; however, hiring temporary faculty is not the best way. Director VanLuvanee
agreed with Richmond's concern; but stated that, from an industrial viewpoint, hiring temporary employees while
in the process of creating a program is a common practice. Industry is learning about the needs of higher education
and must remember that this is funding to invest in the students' needs--not in industry needs. It is his opinion
that industry understands this and will allow OUS to apply the funds as OUS sees best. Director Richmond stated
the second issue is addressing tuition increases; if the public sees tuition increases being invested in adjunct
("temporary") faculty, concerns will be raised. Anderes advised that with the relationship of ETIC to
top tier, great strides cannot be attained when using adjuncts, nor are research and continuity in approach well
served. Richmond added that the Board and System must continue to reiterate that the goal is for excellence in
engineering, computer science, and science for the State of Oregon.

At the conclusion of discussion, Vice Chancellor Anderes stated
that staff recommends the $15 million ETIC and $5 million top tier distribution for OUS and participating
universities. Director Young moved and Director Richmond seconded the motion to approve the distribution of funds
as recommended; the motion was unanimously approved.

$17 MILLION INSTRUCTIONAL ENHANCEMENTVice Chancellor Anderes advised that OUS will be
reporting to the Ways & Means Committee in May on how the $17 million in instructional enhancements are to
be distributed in the 2001-2003 budget. This recommended distribution is based on projected enrollment growth.
The actual distribution will entail a reassessment of the distribution methodology and allocations if the $45
million reduction to the resource allocation model is not funded. This $45 million reduction is only a portion
of the reductions recommended by the Governor. Unless the model is maintained at the 2001-2003 CSL, the $17 million
instructional enhancements would be allocated through the model to the institutions.

OUS must be clear in stating to the Ways & Means Committee
that, if these reductions continue, enrollment growth cannot be sustained under any circumstance.

Discussion:Director VanLuvanee stated that the operation of the
resource allocation model has been poorly understood by the legislature and the state. Progress must be made in
informing them of the nuances of the model. Anderes said that progress has been made in gaining the Ways &
Means Committee's understanding of the model. However, in terms of the state, when the original Governor's recommendation
was received there was not a good understanding of the impact the recommendation would have on the model. But he
stated we are now making progress.

Director Young asked if the instructional enhancement takes into
account the proposed tuition increase. Anderes advised that, when the biennial budget was originally submitted,
it contained $34.3 million for enrollment growth and contained a corresponding amount of tuition revenue which
together support the total cost of instruction. One of the concerns the campus presidents have is, if the $17 million
is not received (or a portion of the $45 million reduction to the model), the impact of the reduction will directly
affect the amount of tuition needed.

Again, Vice Chancellor Anderes stated that the allocations are
estimates and are pending the final legislative appropriation. This information is necessary to ensure that the
Ways & Means Committee has the full information needed to make their decision. Director Young moved and Director
Richmond seconded the motion to approve the distribution of funds as recommended; the motion was unanimously approved.

TUITION RATE INCREASES 2001-2003Vice Chancellor Anderes stated that a report on
proposed tuition rate increases and projected revenues for 2001-2003 is expected to be provided to the Ways &
Means Committee in May. A final tuition increase decision has been deferred until there is a clearer picture of
legislative support. The original OUS budget request did not include tuition rate increases, however, the Governor
recommended a 4%+4% increase. If OUS does not provide the Committee with tuition increase levels, the Committee
will likely accept the 4%+4% recommendation of the Governor. Therefore, staff recommends the Board approve a range
of tuition increases from 2%-5% that would provide universities the latitude required to support individual campus
funding needs. Most campuses are in the position that if the full $45 million reduction to the resource allocation
model is funded, low tuition increases would be adequate to backfill the Current Service Level deficit; however,
if the $45 million is not funded, higher tuition increases will be needed to supplement the loss of state
General Fund support. The Governor recommended the 4%+4% increase to generate a $25 million backfill (replacing
state General Funds support with Other Funds support). Anderes concluded his report by reiterating that staff recommends
a tuition rate increase range of 2% to 5% be approved that would allow each university to have the latitude to
choose within the range.

Discussion:Director VanLuvanee asked if the 2%-5% range would reflect
what the univervisty presidents have assessed as their campus' need (i.e., would any president want to go to 10%)?
Anderes stated that, after looking at potential need, the presidents felt the 5% increase was not only the upper
range of need, but would not cause undue hardship on the students. VanLuvanee stated that, in the spirit of encouraging
the presidents to operate their own institutions (autonomy), the Board does not want to create a barrier. President
Creighton, EOU, advised that it is too soon to tell what amount of increase will be needed as it depends on the
level of state support received; however, he shares Director VanLuvanee's concern that 5% may not be enough to
cover the need. Vice President Specter, OSU, added that although the universities have a responsibility to tie
revenue and expenditures to the goals set by the Board (quality, access, etc.), unknown costs also affect the budget
(for example, energy and healthcare costs) which, in turn, add other factors to the needed funding support. Chancellor
Cox stated that it is understood that the institutions may need to approach the Board at a later date requesting
funding support for these unknown costs. This support could be in the form of an energy surcharge or fees to directly
support the expenditures. President Sara Hopkins-Powell, SOU, stated that in order to maintain the operation of
their campuses, the presidents would have to request a 10%+10% tuition increase. But an increase of that magnitude
would cause hardship to students, which is not an option that presidents could accept.

Director Young asked, if $45 million is needed for the CSL deficit,
can a condition be set that if the legislature provides $30 million (for example), the presidents then would establish
only a limited increase (2.5%)? Anderes replied that the shortfall in the CSL is actually $96 million and the $45 million
is only a portion of the needed backfill. The problem with setting a particular increase amount is that the need
varies with the institution (e.g., small vs big enrollment, geographic location, resident vs nonresident differential,
etc.). President Martha Anne Dow, OIT, stated that all campuses have discussed the tuition increase with their
students and have received students' understanding and agreement to the proposed tuition increase range.

Director Young stated that a message must be sent to the legislature
advising that students are willing to enroll in Oregon's public universities when there is adequate funding support
from the state and a reasonable tuition increase. Director Richmond added a variable tuition increase proposal
should provide a message to the Governor and legislature on the impending impact of tuition increases on the students.

Director Richmond moved and Director Young seconded the motion
to approve the variable tuition increase as recommended; the motion was unanimously approved.